Saks Global Holdings ,the parent company behind the 159-year-old department store Saks Fifth Avenue that’s become both a destination and a symbol for luxury fashion, filed for Chapter 11 bankruptcy protection last week. Saks Global is also the parent company of Neiman Marcus, Bergdorf Goodman, and Saks Off 5th, so those stores will all be affected as well.
What Happened?
Well, industry observers say that they got a little too big for their cash flow britches. Just last year Saks Global spent a whopping $2.7 billion to acquire Neiman Marcus, which in turn lead to financial struggles that they haven’t been able to overcome. It was a deal heavily laced with debt, and many saw it as doomed from the start.
Still, Saks was struggling to pay its vendors even before it acquired Neiman. Through the acquisition, the company received a flood of new money that was supposed to deleverage the combined business and provide it with “significant liquidity,” Saks said at the time.
Not All Bankruptcies are Created Equal
However, not all bankruptcies smell the same. The Chapter 11 filing means that the corporation will be allowed to reorganize rather the liquidate immediately, so although some closures are possible (probable?) stores can/will remain open while they try to figure things out. Still, if you’ve got any store credits or gift cards lying around, it might be a good time to use them, due to potential changes after restructuring.
Additionally, Saks Global secured $1.75 billion in financing to continue operations during the restructuring process. As CNBC reports, the lion’s share, $1 billion, is debtor-in-possession financing that will be used to fund operations while the company is in Chapter 11 while an additional $500 million will be available to the company after it emerges from bankruptcy, which it said it expects to do later this year. Its asset-based lenders provided an additional $240 million in incremental liquidity.
New Leadership Will Try to Right the Saks Ship
The company has also cleaned house and announced a whole new leadership lineup. According to CNBC, former Neiman Marcus CEO Geoffroy van Raemdonck will immediately take over as chief executive, replacing Richard Baker. He had been in the job for just two weeks, but had been involved with Saks since Hudson’s Bay acquired it in 2013 when he was CEO of the Canadian department store.
With van Raemdonck comes a revamped senior leadership team stacked with veterans from Neiman Marcus, which Saks Global acquired in 2024. Darcy Penick, who served as the president of Bergdorf Goodman before Saks bought the department store, will take over as president and chief commercial officer for Saks Global. Lana Todorovich, Neiman’s former chief merchandising officer, has been named chief of global brand partnerships.
Amazon is Fighting Mad
The Chapter 11 announcement not only sent shock waves through the luxury retail industry, but it also left major investors seeing red. When Saks Global acquired Neiman Marcus, a fresh slate of deep-pocketed investors from the tech world, including Amazon and Salesforce, and was expected to create a luxury department store powerhouse with an improved cost structure and stronger negotiating power.
Clearly, that didn’t happen. As Retail Dive reports, Amazon owns just over a 23% stake in Saks Global, and is now battling the company in bankruptcy court. Amazon called out its $475 million of preferred equity in Saks Global in filings on Wednesday, the day Saks Global filed for Chapter 11.
“That equity investment is now presumptively worthless after Saks continuously failed to meet its budgets, burned through hundreds of millions of dollars in less than a year and ran up additional hundreds of millions of dollars in unpaid invoices owed to its retail partners,” Amazon said.
What’s Next for Saks
In a news release, the company said its “evaluating its operational footprint” to put its resources where it sees the “greatest long-term potential.” That likely means a trimmed down store fleet in the coming months to reduce the company’s fixed costs.
“This is a defining moment for Saks Global, and the path ahead presents a meaningful opportunity to strengthen the foundation of our business and position it for the future,” CEO van Raemdonck stated in the release.
“In close partnership with these newly appointed leaders and our colleagues across the organization, we will navigate this process together with a continued focus on serving our customers and luxury brands. I look forward to serving as CEO and continuing to transform the Company so that Saks Global continues to play a central role in shaping the future of luxury retail.”
Is this the end for Saks Fifth, and with it, Neiman Marcus and Bergdorf Goodman? A trifecta that could signal the end of luxury retail stores across the country? Only time will tell….
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